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FOR IMMEDIATE RELEASE
OLDWICK - JANUARY 27, 2022 09:08 AM (EST)
AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) of Equitable Financial Life Insurance Company of America (EFLICOA) (Phoenix, AZ) and Equitable Financial Life Insurance Company (EFLIC) (New York, NY). EFLICOA and EFLIC collectively are referred to as Equitable Life Group. The outlook of these Credit Ratings (ratings) is stable.
Concurrently, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb” (Good) of Equitable Financial Life and Annuity Company (Equitable Financial Life and Annuity) (Lakewood, CO). Additionally, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) of Equitable Holdings, Inc. (Delaware) and all of its Long-Term Issue Credit Ratings (Long-Term IRs). The outlook of these ratings is stable. Please see below for a detailed list of the ratings of the other subsidiaries and Long-Term IRs.
The ratings of Equitable Life Group reflect its balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Equitable Life Group’s ratings are attributable to its strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which declined from the strongest level primarily from a continued higher dividend payout. The overall balance sheet strength continues to be supported by the group’s strong financial flexibility, well-developed, sophisticated risk management practices providing confidence in the capital management approach, and its position among the market leaders in variable annuities (VA), variable universal life and 403(b) retirement annuities. In addition, the group maintains a dynamic hedging strategy to support its VA liabilities. Through its growing partnership with AllianceBernstein affiliate, an additional significant investment of permanent capital was provided by Equitable Life Group to build out private alternatives and private placements, as the group continues to maintain a significant global asset management footprint, which provides a material source of unregulated cash flow to the holding company.
Additionally, the group has recorded consistently strong operating earnings in the past several years on a non-GAAP operating basis with some volatility. The after-tax non-GAAP financial measure is used to evaluate financial performance on a consolidated basis, determined by making certain adjustments to consolidated after-tax net income attributable to holdings that relate to derivative positions, which is a large source of volatility in net income. Consolidated financial leverage at Equitable Holdings, Inc. has increased due to additional issuance of perpetual preferred stock but is still considered to be moderate. AM Best notes that the holding company maintains access to a contingent capital facility, which further enhances the group’s positive financial flexibility. Equitable Life Group also benefits from a diversified and productive distribution model, which includes a large captive distribution channel, as well as extensive third-party distribution relationships. The group’s overall strong liquidity is supported further by an additional new funding agreement-backed note program, and the Federal Home Loan Bank borrowing program.
While Equitable Life Group intends to maintain at least a strong risk-adjusted capital profile at a minimum going forward, it remains constantly exposed to equity market pressures on both sides of its balance sheet. These exposures emanate from its variable insurance products with guaranteed benefits, as well as potential volatility in revenue from asset fees, as a result of market value changes in its large separate account book of business and derivative activity. Although, Equitable Life Group is focused on significantly reducing exposure to the VA guarantees on its books, as the majority of new sales for the company remain non-interest sensitive in nature.
AM Best also notes that Equitable Life Group continues to maintain an appropriate ERM framework following its initial public offering (IPO), with a focus on hedging strategies to protect its statutory and economic capital. The company has updated its economic capital model to be more U.S. centric by shifting from a Solvency II framework to a U.S. economic and risk-based capital/contingent tail expectation-centric capital model post-IPO.
The ratings of Equitable Financial Life and Annuity reflect its balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate ERM.
The Long-Term IRs have been assigned with stable outlooks:
Equitable Financial Life Global Funding— “a+” (Excellent) program rating
The following Long-Term IRs have been affirmed with stable outlooks:
Equitable Financial Life Global Funding— “a+” (Excellent) program rating
— “a+” (Excellent) on all outstanding notes issued under the program
Equitable Holdings, Inc—
— “bbb+” (Good) on $1.5 billion 5.0% senior unsecured fixed rate, due 2048
— “bbb+” (Good) on $1.5 billion 4.35% senior unsecured fixed rate, due 2028
— “bbb+” (Good) on $800 million 3.9% senior unsecured fixed rate, due 2023
— “bbb+” (Good) on $350 million 7.0% senior unsecured debentures, due 2028 (originally issued by
AXA Financial, Inc.)
— “bbb-” (Good) on $800 million 5.25% preferred stock
— “bbb-” (Good) on $500 million 4.95% preferred stock
— “bbb-” (Good) on $300 million 4.30% preferred stock
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.